Valley View: Forget about conventional wisdom

Almost everyone in the electronics industry was caught off guard by the market meltdown of 2001. Widespread predictions of double-digit growth were turned on their head as the chip industry suffered its worst yearly decline ever. How could everybody have been so wrong?

Almost everyone in the electronics industry was caught off guard by the market meltdown of 2001. Widespread predictions of double-digit growth were turned on their head as the chip industry suffered its worst yearly decline ever. How could everybody have been so wrong?

Call it conventional wisdom, or more accurately, herd mentality. We in the media aren't immune, as we quote analysts and industry sages who seem to know where the market is heading. As these predictions get repeated often enough, the temptation is to regard them as fact, not theory.

I was reminded of that again this month as Micron Technology worked to wrap up its takeover of the DRAM operations of Hynix Semiconductor. Assuming the deal is consummated, Micron could soon be the world's largest maker of DRAM chips.

That achievement would have seemed impossible to the industry not so very long ago. Back in the mid-1980's, there was hardly any dispute that the DRAM market was in the process of being dominated by the Japanese, with the Koreans coming on fast. The U.S. was quickly getting pushed out of this commodity market, unable to compete with the more efficient Asian manufacturers.

It was then that most of the U.S. participants threw in the towel and abandoned DRAMs. Stalwarts such as National Semiconductor and Advanced Micro Devices moved on to more lucrative products, while Mostek collapsed entirely. Even Intel, which invented the DRAM, jumped ship in the face of large losses.

Only Texas Instruments hung in there, along with an upstart company that was building wafer fabs in Idaho, of all places. There were many raised eyebrows about the audacity of those potato farmers who thought they could compete with the Asian giants. Not many people gave them a chance.

Micron didn't believe the conventional wisdom. It wasn't scared of being in a commodity market; after all, weren't potatoes a commodity too? And it wasn't willing to concede that Asian companies were inherently more capable of producing chips at low cost.

Initially, it hung back and waited for each new technology cycle to mature before jumping in, which helped keep costs down. Micron stuck to its knitting, patiently riding out the usual swings in the market. Surprisingly, it managed to grow and even to make money in a business many thought was a swamp of red ink.

They were opportunistic, too. When TI finally decided to get out of the business, Micron snapped up their DRAM operations. That gave them worldwide presence and the critical mass to take on the big guys. Before long, they were passing the Japanese giants one after another. One of those feared chip makers, Toshiba, recently agreed to sell Micron its DRAM operations.

It would be useful to recall the story of Micron to help fight the inclination to follow the crowd. The folks who once said that Micron would be better off making potato chips than memory chips can serve as a useful example for all of us.

Robert Ristelhueber is managing editor of EBNOnline. Email is rristelh@cmp.com